Washington — Arizona’s famously tough stance on illegal immigration was on full display at the US Supreme Court on Wednesday, as the state’s top appellate lawyer urged the justices to uphold a statute that threatens to shut down any business that intentionally hires illegal immigrants.

Based on questions during oral argument, Arizona may fare better at the high court than it did last summer when a federal judge in Phoenix ruled that major parts of SB 1070 clashed with federal immigration law and were thus preempted and invalid. That decision is pending before a federal appeals court in San Francisco.

The case before the high court on Wednesday involves an older law, the Legal Arizona Workers Act. The 2007 law outlaws knowingly or intentionally hiring an illegal immigrant. Employers that repeatedly violate the statute may lose their license – the business equivalent of the death penalty.

In addition, the law requires businesses to use the federal government’s E-Verify system, a computer database designed to match the social security number and drivers’ license information submitted on an employment application with the same information stored in government records. Under federal law, participation in the E-Verify system is voluntary.

The case, Chamber of Commerce v. Whiting (09-115), is seen as an important test of how much leeway is open to state governments seeking to pass and enforce state laws designed to discourage illegal immigration.

The Obama administration has entered the case on the side of those seeking to invalidate the Arizona law. The administration argues that it is up to the federal government – not the states – to determine immigration policies and priorities.

Lawmakers in Arizona have long complained that the federal government is not aggressively enforcing federal immigration statutes. They are attempting to fill what they view as a dangerous vacuum by passing their own tough measures.

Faced with the prospect of strict enforcement of a new regime of laws at the state level, a group of business associations and civil rights organizations filed suit challenging the constitutionality of Arizona’s 2007 employment law.

They argue that it conflicts with the comprehensive regulation of immigration put in place by Congress.

Washington lawyer Carter Phillips told the justices that the state law interferes with an attempt by Congress to provide incentives for employers to avoid hiring illegal immigrants, but at the same time not impose such severe sanctions that employers might begin discriminating against prospective workers because of their race or ethnicity.

Mr. Phillips said under the federal scheme a business might face a $250 fine, while under the Arizona statute the same firm potentially faces loss of its ability to conduct business in Arizona.

In passing the federal immigration law in 1996, Congress said the newly-enacted measure would “preempt any state or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ ... unauthorized aliens.”

A key question in the case is whether the Legal Arizona Workers Act is the kind of licensing or “other similar law” Congress had in mind.

Justice Anthony Kennedy questioned Phillips’ narrow reading of the licensing provision. “I see no limitation on what the state can decide is a license in any jurisprudential principle that you cited,” he said.

Acting Solicitor General Neal Katyal said state licensing laws should complement the federal regulatory scheme. He said, for instance, a state should only take action against a business license holder after the business is found by federal authorities to have violated federal immigration laws. Such a regime does not conflict with the goals or priorities of federal enforcement efforts, he said.

Arizona officials reject this view. They say Congress left enough room in the statute for states to enforce their own laws and regulations related to the presence of illegal immigrants in their state. Ms. O'Grady said these efforts are well within traditional police powers that are reserved to the states.

Justice Elena Kagan did not participate in the case, leaving eight justices to decide the matter. Arizona won in both the district court and appeals court, with both courts ruling that the statute was not preempted by federal law.

Under court rules, if the justices split 4-4 on the case, the lower court decision is affirmed.